The Asian Development Bank plans to give US$500 million in loans to develop China's water sector, according to Hisaka Kimura, ADB's East Asia head of private sector infrastructure finance.

The sum includes a US$100 million syndicated loan to China Waters Affairs, a Hong Kong-listed water treatment firm. Besides ADB, 18 banks are involved in the loan, including Hang Seng Bank, Bank of East Asia and Royal Bank of Scotland.

"Water distribution is a new frontier for private sector participation in Asia. A prime objective of the loan is to share our development mission with banks," Kimura said yesterday.

The syndicated loan was oversubscribed more than two times, said Guy Wylie, RBS head of Asia-Pacific primary markets. "This is unprecedented in my 20 years of experience and is the most widely syndicated ADB loan in Asia."

China Water would use the loan to buy, upgrade, expand and operate water systems in small and medium-sized cities on the mainland, benefiting about five million customers, the company said.

Over the next three years, China Water would put US$100 million per year into mainland water operations, as it had done in the past few years, China Water chairman Duan Chuanliang said.

"We are now in talks on several potential acquisitions. We will add new water infrastructure. Demand for water safety has increased in China."

Duan said private sector participation in the mainland's water sector remained low, and it could play a more important role in improving the efficiency and quality of water services.

China Water would take over and improve water utilities formerly owned by local governments, ADB said. About 90 per cent of mainland municipal water networks are owned by local governments.

"China continues to face major challenges, one of which is infrastructure deficit. Being able to meet the challenge of infrastructure deficit will require a growing role of private sector participation," said Philip Erquiaga, ADB's director general of private sector operations.

"ADB wants to incentivise private sector participation in Asia. That is what we hope to achieve with this loan."

For the six months to September last year, China Water's revenue rose 16.1 per cent to HK$1 billion, while net profit dropped 8.8 per cent to HK$137.68 million.

This article appeared in the South China Morning Post print edition as ADB to financewater sector